Take the risk or lose the chance

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When it comes to interest rates most people feel like they are in a foreign country, not knowing what is around the bend.  This feeling, this fear, of not achieving the coveted best rate when compared with friends at the water-cooler can oftentimes be the cause of not getting the best rate.  If the rate is great today, then it will be better tomorrow right?  Not always.  In fact, lending rates are almost the same as the stock market in the sense that news, outbreaks of some new flu and even the stock market itself can influence the rates that tomorrow will bring.  I call this the rate watch game, but it’s not a game – this is serious business and cost or save money each and every month of the loan.

Purchasing

If you are purchasing a home and are a tight fit for a loan, then it’s best not to play the rate watch game.  If you qualify today, it is usually best to lock that loan!  It would be terrible to have finally found a home and received an accepted offer and be in underwriting, paying for an appraisal and home inspection, just to lose out on the loan because the rate moved slightly higher.

Refinancing

If you are refinancing, it’s a little safer to play the rate watch game because you already have the home.  Yes, you may miss out on the lowest valley of the rate drop, but as long as you are saving money – it will be an improvement over what you are paying now.  This is a much stronger position to be it when trying to grab the lowest rate.

Information that can help

 We watch the markets for short term rate adjustments.  These predictive methods are only useful for what tomorrows rate may be and still can be wrong with the presence of bad news the next day.  Longer term rate indicators are just too prone to error to be trusted.  However, if that long term predictor is showing a pending increase in rates – it’s better to be safe than sorry.  So take the risk that rates may go lower or you may loose the chance to improve your payment.

 

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